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7 Factors and Personal Characteristics That Have an Impact on the Decision Making In an Organisation

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Factors and personal characteristics that have an impact on the decision making in an organisation!

Some factors are more important at higher levels of management and others are more important at lower levels.

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1. Programmed versus non-programmed decisions:

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As discussed earlier in the types of problems that managers face, programmed decisions are made in predictable circumstances and managers have clear parameters and criteria. Problems are well-structured and alternatives are well defined. The problems are solved and decision implemented through established policy directives, rules and procedures.

Non-programmed decisions are made in unique circumstances and the result of such decisions is often unpredictable. Managers face ill- structured problems. These problems require a custom-made response and are usually handled by the top management. To start a new business, to merge with another business or to close a plant are all examples of non-programmed decisions.

For example, when Steven Jobs and Stephen Wozniak introduced the first Apple microcomputer in 1978, they were not certain about the market for it. Today, Apple McIntosh computer is a major competitor to IBM computers.

2. Information inputs:

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It is very important to have adequate and accurate information about the situation for decision making; otherwise the quality of the decision will suffer. It must be recognized, however that an individual has certain mental constraints which limit the amount of information that he can adequately handle. Less information is as dangerous as too much information even though some risk takers and highly authoritative individuals do make decisions on the basis of comparatively less information than more conservative decision makers.

3. Prejudice:

Prejudice and bias is introduced in our decisions by our perceptual processes and may cause us to make ineffective decisions. First of all, perception is highly selective, which means that we only accept what we want to accept and hence only such type of information filters down to our senses.

Secondly, perception is highly subjective, meaning that information gets distorted in order to be consistent with our pre-established beliefs, attitudes and values. For example, a pre­conceived idea that a given person or an organization is honest or deceptive, good or poor source of information, late or prompt on delivery and so on, can have a considerable effect on the objective ability of the decision maker and the quality of the decision.

4. Cognitive constraints:

A human brain, which is the source of thinking, creativity and thus decision making, is limited in capacity in a number of ways. For example, except in unique circumstances, our memory is short term with the capacity of only a few ideas, words and symbols. Secondly, we cannot perform more than limited number of calculations in our heads which are not enough to compare all the possible alternatives and make a choice.

Finally psychologically, we are always uncomfortable with making decisions. We are never really sure if our choice of the alternative was correct and optimal until the impact of the implication of the decision has been felt. This makes us feel very insecure.

5. Attitudes about risk and uncertainty:

These attitudes are developed in a person, partly due to certain personal characteristics and partly due to organizational characteristics. If the organizational policy is such that it penalizes losses more than it rewards gains, then the decision maker would tend to avoid such alternatives that have some chances of failure.

Thus a manager may avoid a potentially good opportunity if there is a slight chance of a loss. The personal characteristics of a decision maker regarding his attitudes towards risk taking affect the success of the decision. The risk taking attitude is influenced by the following variables.

a) Intelligence of the decision maker:

Higher intelligence generally results in highly conservative attitudes and highly conservative decision makers are low risk takers. There are others who are more willing to take calculated risks if the potential rewards are large and there is some chance of success.

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b) Expectation of the decision maker:

People with high expectations are generally highly optimistic in nature and are willing to make decisions even with less information. The decision makers with low expectations of success will require more and more information to decide upon a course of action.

c) Time constraints:

As the complexity of the personal habits of the decision maker and the complexity of the decision variables increase, so does the time required to make a rational decision. Even though there are certain individuals who work best under time pressures and may out-perform others under severe time constraints, most people, by and large, require time to gather all the available information for evaluation purposes.

However, most people under time pressure rely an “heuristic approach”, which relies on satisfactory decisions rather than optimal decisions, thus limiting the search for additional information, considering few alternatives and few characteristics of alternatives and focusing on reasons to reject some alternatives. This approach may also be in use when the cost of gathering information and evaluating all such information is too high.

6. Personal habits:

Personal habits of the decision maker, formed through social environmental influences and personal perceptual processes must be studied in order to predict his decision making style. Some people stick to their decisions even when these decisions are not optimal. For example, Hitler found himself bound by his own decisions. Once he decided to attack Russia, there was no coming back even when it was realized that the decision was not the right one. Some people cannot admit that they were wrong and they continue with their decisions even ignoring such evidence which indicates that a change is necessary. Some decision makers shift the blame for failure on outside factors rather than their own mistakes. These personal habits have great impact on organizational operations and effectiveness.

7. Social and cultural influences:

The social and group norms exert considerable influence on the style of the decision maker. Ebert and Mitchell define a social norm to be “an evaluating scale designating acceptable latitude and an objectionable latitude for behaviour activity, events, beliefs or any object of concern to members of a social unit.

In other words social norm is the standard and accepted way of making judgments.” Similarly, cultural upbringing and various cultural dimensions have a profound impact on the decision making style of an individual. For example, in Japanese organizational system, a decision maker arrives at a decision in consensus with others.

This style is culturally oriented and makes implementation of the decision much easier since everybody participates in the decision making process. In America, on the contrary the decision making style is generally individualistic with the help of decision models and quantitative techniques.